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When I estimated my costs Social Security was roughly $5,400.00 a year yet I keep hearing that when I get to retirement age that there won't be any Social Secur

by Timmy_C 16y ago

When I estimated my costs Social Security was roughly $5,400.00 a year yet I keep hearing that when I get to retirement age that there won't be any Social Security left. This is a bad investment or we need to rethink the ways in which that money is being use. Because that seems like a lot of money for a program which may never benefit me.

JoachimSchipper 16y ago
In almost every country, social security payments go toward paying the current recipients, not to paying one's own way. This was, I guess, done in this way to make it possible to set up a social security net in a couple of years instead of in a couple of generations; unfortunately, it gives us the problems of too many old people for the active people to support that we have now.
- barrkel 16y ago
  Of course, even if it was "saved" for future recipients, it wouldn't necessarily be better: one way or another, the future recipients will consume a share of future production. Money is only a way of accounting for this; it's only a way of choosing how to divvy up wealth production amongst consumers. A thought experiment: imagine a hypothetical economy of 10 people with a bulge in it, but producing new young people at exactly the same rate that old people die off. Let's say current dependency ratio is 6 to 4: 6 people supported by 4 people's production. No matter what way you dice it, on average everybody is getting 4/10 of the average person's wealth production. At a later time, the dependency ratio may get worse; let's say it's 8 people supported by 2. Still, everybody needs to get by on average with 2/10 of the average person's production. Whether this is done by taxing current production, or because of a share of ownership of production via capital saved earlier, it doesn't change the fact that there's only so much wealth to go around amongst all the people. Of course, productivity is increasing over time, so it's not like everybody is going to starve. But if anything, using a tax on current production to fund current dependents is more flexible than relying on capital ownership to fund future dependents (who will become "current dependents" in the future). If that 8/10 people own enough capital that they really try to put the squeeze on the 2/10 people creating wealth, that productive minority will revolt. With taxes, a political solution can be found.
  - JoachimSchipper 16y ago
    That's a very good point, although it assumes you cannot "store" production surplus at all. Still, a good point.
Symbol 16y ago
It's a shitton of money, funding what is ultimately a pyramid scheme where I'll never reach the top of the pyramid.
- jbarciauskas 16y ago
  Its a wealth transfer - young people pay in, old people get paid. Also, some amount is currently being set aside for when there aren't enough young people paying in to pay for all the old people directly. That amount looks like it won't be enough, so in the future either a) old people will get paid out a little less or b) young people will pay in a little more. Where's the scheme?
- Goosey 16y ago
  It seems a lot closer to a ponzi scheme than a pyramid scheme. I do believe if I was funding an IRA/ROTH-IRA with that money I would be much better off. However, we are not funding OURSELVES, we are funding those who came before us. And while we may not get our payout (may not be funded my those who come after us) the fact is that those being funded right now deserve what they are getting. It's pretty selfish to just say 'if it isn't helping me, why should I care?'
  - anamax 16y ago
    > the fact is that those being funded right now deserve what they are getting. Really? Why do they deserve it? Interesting fact: Black men collect only a fraction of what black men contribute. And, unlike IRAs, their SS contributions don't result in something that they can leave to their heirs.
akeefer 16y ago
The idea that there won't be any money left is a common misperception, but it's pretty inaccurate. Since it's a pay-as-you-go system, it can't run out of money like a bank account. Instead, it will simply be taking in less than it should be paying out. The current best estimates are that Social Security will be paying out around 75% of what it should be paying out by the time that people in their 20's now retire. That's still a massive, gigantic problem, but it's a world different from there simply being no payout at all. http://www.getrichslowly.org/blog/2010/09/01/yes-you-will-get-social-security/ http://www.getrichslowly.org/blog/2010/09/01/yes-you-will-ge...
- TGJ 16y ago
  I guess your saying that payouts across the board will be 25% short? I guess that is some comfort from the fact that I know I 'have' to pay in to a system that I have no choice in and at least get 75% of my money back at some point.

by Timmy_C 16y ago

JoachimSchipper 16y ago

In almost every country, social security payments go toward paying the current recipients, not to paying one's own way. This was, I guess, done in this way to make it possible to set up a social security net in a couple of years instead of in a couple of generations; unfortunately, it gives us the problems of too many old people for the active people to support that we have now.

barrkel 16y ago
Of course, even if it was "saved" for future recipients, it wouldn't necessarily be better: one way or another, the future recipients will consume a share of future production. Money is only a way of accounting for this; it's only a way of choosing how to divvy up wealth production amongst consumers. A thought experiment: imagine a hypothetical economy of 10 people with a bulge in it, but producing new young people at exactly the same rate that old people die off. Let's say current dependency ratio is 6 to 4: 6 people supported by 4 people's production. No matter what way you dice it, on average everybody is getting 4/10 of the average person's wealth production. At a later time, the dependency ratio may get worse; let's say it's 8 people supported by 2. Still, everybody needs to get by on average with 2/10 of the average person's production. Whether this is done by taxing current production, or because of a share of ownership of production via capital saved earlier, it doesn't change the fact that there's only so much wealth to go around amongst all the people. Of course, productivity is increasing over time, so it's not like everybody is going to starve. But if anything, using a tax on current production to fund current dependents is more flexible than relying on capital ownership to fund future dependents (who will become "current dependents" in the future). If that 8/10 people own enough capital that they really try to put the squeeze on the 2/10 people creating wealth, that productive minority will revolt. With taxes, a political solution can be found.
- JoachimSchipper 16y ago
  That's a very good point, although it assumes you cannot "store" production surplus at all. Still, a good point.

Symbol 16y ago

It's a shitton of money, funding what is ultimately a pyramid scheme where I'll never reach the top of the pyramid.

jbarciauskas 16y ago
Its a wealth transfer - young people pay in, old people get paid. Also, some amount is currently being set aside for when there aren't enough young people paying in to pay for all the old people directly. That amount looks like it won't be enough, so in the future either a) old people will get paid out a little less or b) young people will pay in a little more. Where's the scheme?
Goosey 16y ago
It seems a lot closer to a ponzi scheme than a pyramid scheme. I do believe if I was funding an IRA/ROTH-IRA with that money I would be much better off. However, we are not funding OURSELVES, we are funding those who came before us. And while we may not get our payout (may not be funded my those who come after us) the fact is that those being funded right now deserve what they are getting. It's pretty selfish to just say 'if it isn't helping me, why should I care?'
- anamax 16y ago
  > the fact is that those being funded right now deserve what they are getting. Really? Why do they deserve it? Interesting fact: Black men collect only a fraction of what black men contribute. And, unlike IRAs, their SS contributions don't result in something that they can leave to their heirs.

akeefer 16y ago

The idea that there won't be any money left is a common misperception, but it's pretty inaccurate. Since it's a pay-as-you-go system, it can't run out of money like a bank account. Instead, it will simply be taking in less than it should be paying out. The current best estimates are that Social Security will be paying out around 75% of what it should be paying out by the time that people in their 20's now retire. That's still a massive, gigantic problem, but it's a world different from there simply being no payout at all. http://www.getrichslowly.org/blog/2010/09/01/yes-you-will-get-social-security/ http://www.getrichslowly.org/blog/2010/09/01/yes-you-will-ge...

TGJ 16y ago
I guess your saying that payouts across the board will be 25% short? I guess that is some comfort from the fact that I know I 'have' to pay in to a system that I have no choice in and at least get 75% of my money back at some point.